In France, an Economic Bullet Goes Unbitten

Nearly two years ago, the chief executive of one of the largest international companies based in France described what he viewed as the best chance for needed economic reform that would open up European economies by making it much easier to hire and fire workers.

It was, he said, something that politicians from all parties knew was necessary, but that was unlikely to be popular with voters. The answer, he said, was for parties in the major Continental economies to accept the unpopularity that would come from economic change, so that each government would expect to be replaced at the next election by a government that would then offend voters by adopting more such legislation, and in turn be replaced.

The best chance for that, he said privately, was in Germany. He saw France as far less likely to have it work, in part because even the supposedly conservative parties were becoming more and more opposed to change.

He got the unpopularity part right, a fact that was clear both in the inability of Chancellor Gerhard Schröder to win re-election last fall in Germany, and in yesterday's abrupt surrender by the French president, Jacques Chirac, as he revoked a law his government had put into effect aimed at making it easier to hire and fire workers under 26.

There is, however, little sign outside Germany, where a coalition government may try to enact some limited economic changes, that the push for change still engages politicians. The opposition Socialist Party in France was outspoken in its denunciations of the law that had been pushed through Parliament by the prime minister, Dominique de Villepin. Even President Chirac's interior minister, Nicolas Sarkozy, a likely presidential candidate in next year's election, failed to offer full support.

In Italy, where voters went to the polls on Sunday and yesterday, the opposition coalition led by Romano Prodi has talked of changing one of the few steps taken by Prime Minister Silvio Berlusconi to raise the retirement age gradually and thus ease by a little the burden on the government pension system.

In these countries, a class accustomed to security — those with traditional jobs ending in generous retirement plans — opposes any effort to change the system. Economists may warn that the very system is one reason that unemployment, particularly youth unemployment, has soared, and that pressures of globalization mean that Europe must eventually change to prevent its growth from faltering even further. But many voters seem to prefer delaying that as long as possible.

The law adopted and then abandoned by the French government would have allowed companies to offer two-year contracts to workers under 26, but it provided that those contracts could be ended for any reason.

It was intended in part as a response to last year's riots in poor, often Arab, suburbs of Paris, where joblessness is high and hope low. The idea was that employers, freed of the need to keep bad hires on the payroll, would be more willing to employ young Arabs.

But university students and labor unions responded with fury, and in the end the French government, as it had done before, backed down.

One reason for the reluctance of the French and the Italians to stick by what the politicians see as needed changes is the longtime insecurity of governments, in contrast to relatively stable political situations in countries like the United States and Britain.

In Italy, there has been a history of short-lived governments in much of the time since the end of World War II, albeit many of these governments were populated by the same politicians. Mr. Berlusconi has been an exception, managing to last a full Parliament term.

In France, change has been much slower in one way — Mr. Chirac has been in office for more than a decade — yet French administrations seem to be less confident in their mandate. French history is full of violent changes in government, not least the French Revolution, and current politicians can remember 1968, when some thought that student protests in Paris and other cities were about to force President Charles de Gaulle to resign.

Three decades later, the adoption of the euro as the common currency of 12 European nations, including France and Italy, was forecast by some as making change inevitable, since it would remove currency devaluations as an economic tool in staying competitive. But that has not happened to the extent forecast, and some politicians, including two cabinet ministers in Italy, have blamed the euro for the current problems.

Instead, widespread expectations that unpopular changes are likely to be forced has made governments far less likely to remain popular and may have caused consumers to worry about whether the pensions they were promised will be there when they retire. That concern, in turn, may be responsible for the high savings rates — and low consumption spending, at least by American or British standards — that has come to characterize leading Continental economies.